The deepening credit crisis will wreck what few sales prospects automakers had for the rest of this year, with J.D. Power and Associates slashing its retail car sales forecast Thursday and warning next year will be even worse.

The downturn in auto sales threatens to close 700 car dealerships nationwide and 70 have already closed this year in California, auto industry officials said this week.

“This is a recovery that is going to take several years to work itself out,” said Jeff Schuster, executive director of automotive forecasting at Westlake Village-based J.D. Power.

Power now forecasts 10.8 million retail new car and light truck sales this year – down 16 percent from 2007 and a whopping 3.4 million sales from its July forecast.

Including fleet sales, Power expects sales to fall to 13.6 million units this year from 16.1 million in 2007. Fleet sales this year are now expected to fall to 2.8 million vehicles from 3.3 million sales last year.

This is Power’s third revision for the U.S. market – a full 4.2 million fewer retail sales than it first predicted in March.

“The additional decline is a function of growing concerns around availability of credit and leasing, declines in vehicle equity and general economic stress,” Schuster said.

Power also expects 2009 total sales of 13.2 million, 10.6 million at the retail level.

And the market is changing so rapidly that the outlook could get even grimmer.

Sales this year could fall by an additional 200,000 units because it’s not clear what impact the financial turmoil will have on consumers between now and the end of the year, the forecast said.

Earlier this week the National Automobile Dealers Association said the economic crisis could force 700 dealers to close.

So far this year 70 have shut down in the Golden State, said Brian Moss, spokesman for the California New Car Dealers Association.

“There may be more. When a downturn is as severe as this one has been that has to be expected,” he said.

“It’s clear that the market is in a downturn. I think that most of the forecasts are coming up with similar numbers,” Moss said. “The question is how long is this sales decline going to last.”

The state trade association issues a forecast every quarter and the one in July called for a sales drop of 15 percent this year. Moss said the third quarter outlook will be ready in about 10 days.

Power’s Schuster attributed about 66 percent of the anticipated sales decline this year to consumers delaying vehicle purchases.

On average, consumers are now keeping their vehicles 71 months, up from 67 months in 2007.

Schuster said that declining trade-in values, fewer leasing options, credit market restructuring and increasing purchases of used vehicles will all put added pressure on the U.S. new-vehicle sales market next year.